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Nightly Business Report

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Ukraine 11, Hollywood 6, California 6, Calpers 5, Russia 4, U.s. 4, Carl Icahn 3, Citi 3, Pfizer 3, Apple 3, S&p 3, Washington 3, America 3, Us 3, Cupertino 3, Jim Cramer 2, United States 2, Eric 2, Tyler Mathisen 2, Realtors 2,
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  PBS    Nightly Business Report  

    February 28, 2014
    7:00 - 7:31pm PST  

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this is "nightly business report" with tyler mathisen and susie gharib. brought to you in part by -- >> the street.com. founded by jim cramer, the street.com is an independent source for stock market analysis. cramer's action alerts plus service is home to his multimillion dollar portfolio. you can learn more at the street.com/nbr. rising tensions. stocks wrap up a strong month with blue chips ending higher today despite dramatic events unfolding half a world away in ukraine. tae a tense weekend lies ahead. housing milestone. fast-rising home prices are giving borrowers back equity. but will it be enough to put a spring into spring selling season? facing shareholders. app ceo tim cook takes questions on everything from new products
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to potential acquisitions at his company's annual meeting. we'll talk to a big investor who was there. all that and more tonight on "nightly business report" for friday, february 28th. good evening, everyone. from the white house to wall street today, growing concerns about a possible showdown between ukraine and russia. late today, president obama had strong words about what's at stake. >> any violation of ukraine's sovereignty and territorial integrity would be deeply destabilizing. the united states will stand with the international community in affirming that there will be costs for any military intervention in ukraine. >> earlier today on wall street, investors and traders were spooked on unsettling reports that russia's foreign minister confirmed that thousands of heavily armed russian troops moved into ukraine's crimea region, ramping up tensions between moscow and the interim government in kiev. within minutes, a 126-point gain in the dow vanished. but nearly as quickly as those
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headlines spark add final hour selloff in the markets, stocks battled back surging higher until the closing bell, enough to see the s&p 500 and the russell 2000 close at fresh all-time highs. on this last trading day of february, the dow rose 9 points, s & p at 10. susie, today's volatility notwithstanding, the just completed month of february was a doggone good one for wall street. a welcome turn around after the stumbling start of the year in january. the dow finished the month fully 4% higher, the s & p up 4.3%, and the nasdaq climbed 5%. dominic chu has more now on this fabulous february in the marques. >> reporter: it wasn't looking good. after a banner year for stocks in 2013, january got off to anything but a rip roaring start. but february? that's another story. stocks came bursting back to life with the dow, s&p 500 and
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nasdaq all posting gains of around 5%. that means that in february, the dow came close to a record high, the nasdaq composite reached a 14-year high, while the s&p 500 hit a new record high. mid cap and small cap companies also set new milestones as well. that has some money managers looking for opportunities in case the market continues its positive run. >> when you look inside the stock market itself, though, we think that you ought to be looking for bargain types of stocks. we like the automobile, we like the refiners, and we like the home builders. >> reporter: but risks to the rallying stocks still remain. there's the as yet unknown effect of the severe winter in much of the u.s. as well as economic concerns in places like china and geopolitical risks in places like ukraine. that has some investors taking a more cautious approach to the stock market. >> we're not particularly bullish or bearish right now. we're in the market but not adding risk. it's not about what you own or what you buy, it's about what price you pay. we're very happy to see the
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markets acting as well as they are. but we're not willing to pay up in terms of valuation for most of what's out there. >> reporter: there's no get bulls have been in charge. the question is will it stay that way in the comic weeks? for "nightly business report," i'm dominic chu. bitter cold weather and unrelenting snow storms are getting the blame for taking a sizeable chunk out of overall u.s. economic growth in the final quarter of 2013. the economy slowed down from more than 3% growth during the summer to a rate of 2.4% growth to the end of the year. meanwhile, st. louis federal reserve bank president james bullard says despite the dip in economic growth and more bad weather in the current quarter he's still optimistic about the economy. >> all the things that we've been worried about and complaining about over the last couple of years have dissipated. you've got household deleveraging more or less run its course, you've got wealth in the u.s. becausequits are up
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30%. and stay optimistic probably 2013. >> as long as the economy continues to grow he said the central bank will continue to taper its bond buying stimulus program. stocks are performing roughly as he thought they would, moving up gradually but with more volatility than in 2013. eric ristobin, chief investment strategist with russell investments. you heard i assume what president bullard just said of the st. louis fed that he's generally optimistic about the economy. are you? >> yeah, i am. we think the u.s. is going to grow about 3%. data in the first couple of months has been spotty, but the market is blaming weather. we think that's probably it. the numbers of retail sales since valentine's day when the weather's been pretty good, consumer sentiment is strong. we expect this to be a blip, and more deferred economic activity than lost economic activity.
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>> eric, you know investors don't like a crisis. you heard at the top of the program all the stuff going on in the ukraine. yet a very strong february. so how does all of this play out going into march? >> well, the ukraine situation obviously is something you got to keep an eye on. normally that kind of turmoil, i mean if you go back just to egypt and syria, they're obviously catastrophic for the countries that are involved in them but they usually don't have a kind of systemic risk to them unless there's military escalation. and i think that's why the news is so full of potential troop movements russians into the crimea. at this point i still think it's unlikely we go to military escalation but that's the thing that would make this a bigger problem. otherwise good equity returns, good risk on returns across the board. investors should look through the turmoil of short term and maybe political turmoil that may or may not actually impact investments and look at the fundamentals of stock prices,
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earnings and the economy. >> you seem to be painting a pretty positive picture for the rest of 2013. your first pick tonight is pfizer. why? >> well, i think it's a good emblem of one of our larger overweights which is health care. in general, actually, we are overweight those parts of the economy that are cyclical, that will benefit from a good economy, things like energy, things like financials are a hedge against that frankly is health care. we think it is the cheapest offensive sector out there and particularly we like pharmaceuticals and specifically we like pfizer. >> and you also you mentioned just financials and bank of america is another one of your recommendations. tell us what's the appeal with bac. >> like a lot of things we're looking at this year, we're looking at valuations. we think it's going to be a good year for banks in general. and we think it will be a better year in terms of stock price for those banks that are cheaper than average going into the year. we think bank of america is cheaper. we think it's going to be a good year for banks in general.
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>> energy has been a little bit or orphaned hasn't it, eric? >> absolutely. last year was horrible for energy. a lot of negativity was priced into commodities in general but specifically energy stocks. we think it got overdone. and again, our overweight in energy really is a manifestation of the fact that we think we're going have a good economy that's going to be good for energy prices, it's going to keep oil well above $90 a barrel. and companies like hall haliburton will make money because they're oil field services company. >> as you know, investors have been looking to almost every single economic report and parsing through every detail to figure out what's next for the markets. the big one next week is the february jobs report. what are you expecting in that report? and how might that play out in the markets? >> we're expecting about 180,000. for the remainder of the year we're actually expecting over 200,000 jobs. i think, though, you got to be
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looking at the impact of whether the weather hasn't been great. i think the market will probably accept 130,000 jobs. anything meaningful below that and i think you're going to have an issue. it is a number to watch. but three bad numbers, really bad numbers in a row i think are going to be problematic. >> where do you think interest rates are going to end the year? how much higher, how much lower, roughly where they are very quickly? >> higher. we think ten year is going to end up about 340, which means that's a headwind for stocks. we think that equities benefit from the headwind of the stocks. and i think investors are going to be attracted to equities. >> scores on the companies you mentioned, pfizer, bank of america and haliburton? >> we own them all through our funds and i own our funds. >> chief investment strategist with russell investments. thanks very much. the outlook for stocks and the economy hinges to some extent on what happens with the spring selling season. it's looking a little bit shaky after today's news that signed contracts to buy existing homes were flat in january. now, realtors blame that on
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nasty winter weather. others say a bigger barrier to the housing recovery is because of a shortage of homes on the market. but as diana olick explains, that might be starting to change. >> reporter: gary montgomery has wanteded to move colorado for awhile to be closer to his grandkids. but the burbank, california homeowner owed more on his mortgage than his home was worth. >> it's a little terrorizing when you're underwater. and you're wondering if you're ever going to be able to walk away from the house and not carry a debt with you. >> reporter: but montgomery is finally free. one of nearly 4 million borrowers who came up from underwater on their loans thanks to fast-rising home prices. >> we've had a couple of homeowners sell their homes that are within a ball throw. and they did very well. and it gave me the feeling that we would at least get on the green side again. >> reporter: there are, however, 9.8 million borrowers still
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underwater on their loans according to a report from zillow, and 19 million more who have less than 20% equity in their homes. those additional borrowers likely could not sell for enough profit to meet the expenses related to moving. that so-called effective negative equity is keeping the inventory of homes for sale incredibly tight, which in turn is even limiting those who might want to sell. >> because of the tighten ven story situation there's nowhere for them to move. i have a number of buyer whose have their houses ready to go the minute they find something to buy. and unfortunately, right now inventory is so tight in the area that we're at, there are 35 houses for sale. and that's two bedroom one bath all the way up to four bedroom, four bathroom property. >> realtors are begging the builders to ramp up production, but housing starts have been weak this winter. yes, partly because of the rough weather, but also because of rising prices for land, labor and materials.
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for now at least, the growing tension between supply and demand is unlikely to thaw. diana olick, "nightly business report" in washington. >> to read more about homeowner equity and what it means for the housing market, go to our web site nbr.com. does one big apple shareholder think ceo tim cook did enough at today's annual meeting to get investors juiced about the company again?
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could the united states be running out of pilot? the government accounting office says yes that, regional airlines are actually having trouble hiring enough qualified pilots. but there's a good reason for that alleged shortage. regional carriers simply don't pay enough money to attract out of work pilots. the average salary there just over $22,000 a year for a starting copilot. a big name airlines don't have the same problem because they pay significantly higher salaries. the outlook for the nation's roads and bridges doesn't look much better. federal transportation officials say that more funding is needed to address what it calls a growing infrastructure deficit of crumbling roads, bridges and highways. in a report to congress to the dot says washington needs to spend as much as $146 billion a year to maintain and improve the nation's roads and crossings starting right away. to retail where japan's fast retailing the parent company of unico is in talks to buy jay
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crew. according to the wall street jourl, j crew's management is seeking $5 billion for the business. but it's unclear whether fast retailing is willing to pay that price in a statement the company says it doesn't comment on market speculation. pier one imports cuts its outlook for the second straight month because of snowed-in shoppers. that is where we begin tonight's market focus. the home furnishings retailer blamed the harsh winter for soft traffic. the company did say it expects business to be normal once the weather gets better. still shares down more than 5.5% today to $18.92. it was the opposite story for 3d systems. the 3d printer maker gave investors a strong outlook, predicting its $1 billion in revenue in 2015. now, this quarter its revenues rose more than 50%, earnings were in line with the street's estimates, and shares rose nearly 2% to $75.96. citi group is revising last year's earnings results because of fraud at its mexican banking
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unit. the bank will cut its 2013 net income by $235 million. citi group says the mexican bank issued $400 million in bad loans to a mexican oil services company. citi shares fell slightly to $48.63 today. river bed technology being pushed to sell itself by an activist investor. received a few takeover offers. bloomberg is reporting the company received informal proposals from firms including silver lake and kkr for about $25 a share earlier today the network equipmentmaker rejected a bid from elliott management for $21 a share. the stocks spiked nearly 8% to $22.28. doctors are urging the fda to reverse the approval of zojenix's new pain drug which is expected to hit pharmacy shelves next month. the drug is said to be five to ten times more powerful than vicodin, critics say taking just twoft poe at the present time pills could be deadly. shares fell more than 4.5% to
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$4.35. shares of apple have struggled lately as you may well know, falling 6% so far this year and ending a fraction lower today. and that likely pushed a lot of stock owners to attend the company's annual shareholders meeting today in cupertino, california. our josh lipton was there and has more on what went on. >> reporter: apple shareholders drove and flew in from all around the country today to listen to ceo tim cook speak at the company's annual shareholders meeting. shareholders gathered at the company's headquarters in cupertino, california, to vote on ten proposals, including executive compensation, company practices, and its 2014 stock plans. they also voted overwhelmingly to re-elect their directors. toward the end of the meeting, tim cook fielded questions from shareholders who pressed the ceo on why he didn't speak more about new products in the company's pipeline. cook says apple didn't want to
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offer a road map to competitors, and that the company in his words gets ripped off enough by rivals. he also emphasized that the company is spending a lot more money on research and development, which he says demonstrates its commitment to product innovation. there is also a lot of speculation about what apple's next product could be. a wearable device, an improved set-top box, or maybe a new service such as mobile payments. some analysts on wall street worry that these ideas sound exciting, but not necessarily revolutionary. still shareholders didn't share in that concern. >> both because the employees themselves are passionate about what they do, but more i was a systems engineer quite awhile ago. i see the technology that's ongoing now outside of the company. and i think that apple can just capitalize on technology that exists now. >> reporter: the company stock is down about 6% this year, but it's up more than 35% since its low last june. tim cook made a point today of
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saying he isn't interested in the short-term moves of the stock but rather positioning his company to benefit and prosper for the long term. josh lipton, "nightly business report," cupertino, california. let's get the reaction now to that meeting from one of apple's largest shareholders, calpers. a california public employees retirement system. the senior portfolio manager and director at calpers is with us. ann your firm or fund has had a position in apple for many years since the 1980s. you've been to a lot of these shareholder meetings over the years. did tim cook say anything that you think is going to inspire and encourage investors and make them feel confident about the direction he's taking the company? >> yes. i think the most impressive thing about tim cook is that he stays cool, calm and collected when there is noise and distraction all around him. the company's been under a lot of intense short-term pressure,
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notably from mr. carl icahn. i think he's been smartly rebuffed. and the voice of reason has prevailed. this is a company that's very important to calpers for the long term. we're very pleased that tim cook has got his eye on the ball, thinking about the long term, thinking about innovation, and he's considering the culture and integrity and issues like sustainability, everything that makes apple a good corporate citizen. we know that's what shows success for the long term. >> since you raised the name of carl icahn, let me get your impressions of his investment thrusts into several critical technology companies. apple, dell within the past year, and most recently e-bay. in several of those cases he has gone right at the question of corporate governance. is he acting responsibly on behalf of shareholders in his crusade from his point of view to improve corporate governance?
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what do you think? >> well, you know, there's people who make a lot of noise and get attention, and there are people who sit down and have a sensible conversation and really work things out over the long term. and mr. icahn has a very different style. we say there are three types of shareholder out there. there are owners, there are traders, and there are raiders. and calpers we consider ourselves to be owners. we're there for the long term. we expect to talk. we expect to take action when needed. but we don't really think it's sensible to try to make mat massive changes at companies by making rather colorful statements to the press or tweeting a new strategy for a big company. this is probably provocative action intended to get atte we're talking about long-term strategic issues it's best with
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a cool head and probably with the door closed where people can sit and talk properly. >> one thing that carl icahn has done, he's put a lot of attention on how apple manages its cash. and it has a lot of it. how do you feel that the conversation behind those closed doors is changing about cash management? and are you satisfied with what's going on? >> right. well, i think carl icahn was very late to the party on this. because the issue of the pile of cash was under discussion two years ago when the company first set out its plans. since then the pile of cash has gotten bigger, and that's a problem that you want to have. you remember last year another hedge fund took a pill to apple on the same issue. he didn't make much of a move forward from it. and apple has done the right thing. it's kept to its plans, communicated what it's doing, committed to $100 billion to be returned to shareholders. and it's going to review those
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numbers in march and april. and we're satisfied that that's a sensible course of action. we don't want rash decisions made in the heat of a dispute with a short-term activist. that's not sensible. >> all right. we're going to have to leave it there. thank you so much, ann simpson with calpers. and coming up on the program, the hollywood business model is changing from the way films are financed to where they're produced. but as tinseltown gets ready to host the oscars can the industry reverse the trend?
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there will be a lot of diamonds and other gems, not to mention beautiful fashions on display this sunday at the academy awards. jane wells hit the red carpet which may be a wet carpet this weekend. a few days ahead of hollywood's biggest night. she's going to tell us now how the business of making movies and where a lot of films are being made has changed over the past year. >> reporter: if it seems like there's a lot of really good film >> i will not fall into despair. >> reporter: -- it's not your imagination. >> there's nine best picture nominees. all of them are absolutely worthy. >> reporter: hollywood is being forced to put out a consistently good product as competition from quality television is fierce, especialally from netflix. >> a lot of choices that allow people to see things, and obviously if there's good material out there, whether it's on free tv or pay tv, i just
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think it's really good for the business. >> reporter: this year, netflix is even up for an oscar for best documentary with "the square" based on the uprising in egypt. >> as a documentarymaker, that's very exciting to see the kind of muscle that netflix has put behind our film and the kind of attention they've given to it is really exciting. it's groundbreaking. >> reporter: here on the soggy red carpet heading into the weekend, so much about hollywood is changing including the way movies are financed. studios are reluctant to fully fund films but producers have to get creative. the producers of "american hustle" lined up much of the money to shoot the nominee by selling distribution rights at cannes film festival. >> we picked up probably 75% of the money for the movie with that. that squeezes in a good way your risk, but it also hurts your up side. >> reporter: and one other way to save money, shoot somewhere
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else. hollywood is no longer in hollywood. "gravity" was shot in the u.k. and arizona, "12 years a slave" in louisiana. this week disney announced it would shoot a new tv series. gotham is the new hollywood. >> my early movies were all made here. now none of them are made here. >> reporter: the milken institute says california lost 16,000 movie and tv jobs over eight years, while new york gained over 10,000. it suggests the golden state needs to do more to keep production here where it all began and where it's being celebrated sunday night. for "nightly business report," jane wells, hollywood. >> and a soggy celebration it may be. to read more about hollywood's changing business model log onto our web site, nbr.com. that's "nightly business report" for tonight. i'm susie gharib. thanks for watching. >> thanks from me as well. i'm tyler mathisen. have a great weekend, everybody. we'll see you back here on monday. "nightly business report" has been brought to youin part
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by -- >> the street.com. founded by jim cramer, the street.com is an independent source for stock market analysis. cramer's action alerts plus service is home to his multimillion dollar portfolio. you can learn more at the street.com/nbr.
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gwen: the ground is shifting in ukraine on gay rights and congress and in society. we explore it all tonight on "washington week." >> any violation of ukraine's sovereignty and territorial integrity would be deeply disabling which would not be in the interest of ukraine, russia or europe. >> we believe that everybody needs to step back and avoid any provocation. >> the secretary of state means russia. as tensions escalate in ukraine. the standoff is looking more cold war